By Melissa Krudwig
If you purchase a home or any type of property, you normally are be required to submit earnest money (EM) to the seller. In real estate transactions, we referred to EM as sign of good faith.
According to the Georgia Real Estate Commission (Commission), “Earnest money is the buyer’s initial commitment of something of value to indicate a serious desire to buy the property according to the terms of the offer being submitted. Many people treat earnest money as a measure of the sincerity of the buyer’s interest and his or her ability to purchase.”
The Commission’s Georgia Real Estate InfoBase goes on to state that “The earnest money is not a legal requirement for a binding sales contract. The mutual promises to exchange valuable assets given by the buyer and the seller provide the legal consideration in a sales contract, and the agreement requires no additional consideration.”
“However, the broker may request or the seller may insist that a certain amount of earnest money accompany the offer. This point may be particularly important if closing is to occur several months after the signing of the contract, but the requirement exists in most contracts of any duration.”
These funds are held in an escrow account managed by a broker or by the title company. The deposit is then applied to the buyer’s consideration or returned to the buyer at the closing. In the state of Georgia, your earnest money credit will be presented on the closing disclosure (closing statement).
Should the buyer breach the contract, the buyer’s earnest money normally would be released to the seller.
The amount EM provided is negotiated between the seller and the buyer. This amount will vary based on several variables. Most often, the amount of the EM is based on the sales price. The amount also may be higher in commercial or land transactions.
The Commission’s Georgia Real Estate InfoBase further states that “Earnest money is payable in cash, by certified check, by personal check, or at times in the form of other valuable assets. An earnest money deposit in cash avoids problems associated with personal checks, such as the buyer having insufficient funds in the account or stopping payment on the check, but cash deposits present sales associates with additional problems. When there may be a delay before the licensee can turn the money over to the broker, questions might arise concerning the amount of cash received and possible improper use of the funds by the sales associate. These questions, along with increased chances of loss, make cash a less desirable form of earnest money.”
Like any other part of the real estate transaction, having a professional protect you and your earnest money is critical. Be sure to hire an experienced real estate team who are familiar with the Georgia Real Estate law and best practices.
Army Veteran Melissa Krudwig is a Realtor and is the team leader for The Think Melissa Team, with more than 30 years of combined team experience. http://www.thinkmelissa.com TheBearofRealEstate.com